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CAGAYAN DE ORO, Philippines – Slapped with a disconnection notice, the Cagayan de Oro Water District (COWD) sought arbitration on Tuesday, March 5, amid an ongoing dispute over a bill exceeding P400 million from its primary supplier of treated water.
The Cagayan de Oro Bulk Water Incorporated (COBI), a company controlled by business tycoon Manny V. Pangilinan’s Metro Pacific group, has threatened to discontinue its supply of bulk water to COWD unless the district settles some P430 million in unpaid water bills. The water district, however, has refused to acknowledge the debt.
COBI has been distributing 80,000 cubic meters or almost 50% of the city’s water supply. About 70% of the supply goes to the eastern villages of the city.
Engineer Antonio Young, COWD general manager, wrote COBI on Tuesday, asking its executives to resolve the issue according to what was stated in their contract.
“We are willing to go back to the negotiating table,” Young told Rappler.
Young said a clause in the COWD-COBI agreement provides that both parties shall “attempt to resolve the dispute by referring the matter to the respective chief executive officers of the party” within 20 business days from the date of delivery of the notice.
He said the same provision states that the dispute should be resolved by arbitration if the matter is not settled within the given time frame.
Debt claim
Young said COBI was claiming an additional P3.97 for every cubic meter it supplied to the COWD in 2021 when the bulk supplier implemented a rate increase.
That year, at the height of the COVID-19 pandemic, COBI increased its rate from P16.60 to P20.57 without the COWD agreeing to it.
The water supplier implemented the first increase from January 1, 2021, to December 31, 2023, and then effected another rate increase last January 1.
Young said the COWD invoked a force majeure provision in their contract because, at that time, the country was suffering from the impact of the COVID-19 pandemic.
COWD has asserted that there was no legal basis for it to pay the accumulated price difference since COBI implemented an increase without the water district agreeing to it.
The COWD board of directors did not acknowledge COBI’s rate adjustments, and none of it was listed in the water district’s book of accounts as payables, according to Young.
He said, “How can I pay for something if it’s not acknowledged as debt?”
Doing so, Young said, would make the COWD liable in the eyes of state auditors in the Commission on Audit (COA).
Costly arbitration
He said COBI has been reluctant to go through the arbitration process given the costs. In the agreement, the two companies agreed to resolve disputes through arbitration in Singapore, based on the rules of the Singapore International Arbitration Centre.
That provision, according to Young, was what Metro Pacific Water wanted during the contract negotiations stage.
Cagayan de Oro Councilor Joyleen Mercedes Balaba called for a review of the contract between COWD and COBI.
“If it’s disadvantageous to our people, I think… we should cancel the contract between COWD and COBI,” Balaba said.
Rappler went to COBI’s office on Wednesday, March 6, but was told by the guard that there was no one inside to give a statement.
COBI, a company that was formed after COWD and Metro Pacific Water signed the joint venture agreement in 2017, has demanded for the second time that COWD settles its outstanding balance within 30 days.
Other options
A copy of the notice obtained by reporters from Cagayan de Oro Mayor Rolando Uy showed that COBI has claimed that it was partially paid for its December 2023 billing, while the COWD has yet to settle its January 2024 billing.
“Unfortunately, COWD’s delay in settling its monthly invoices and its willful disregard of the applicable bulk water rate have caused a strain on COBI’s ability to meet its financial obligations and support its continued operations,” a part of COBI’s notice read.
Due to the situation, the COWD said it was considering turning to other bulk water suppliers.
“Of course, if they cut [the supply], we will start negotiating with private operators in the purchase of water [through] emergency purchases,” Young told Rappler on Wednesday.
He, however, said this would be COWD’s last resort, and they were exploring all available legal options to prevent the worst-case scenario. – Rappler.com
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